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What The Heck Is GDP? - YouTube
Channel: BrainStuff - HowStuffWorks
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let's say you've just gotten a job offer
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to work in the majestic country of bum
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Sylvania awesome right you've always
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wanted to live amongst the scenic bum
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Sylvania and swamplands and here the
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local ghost toad sing their famous
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mating screech but before you pony up
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the $549.95 for rosetta stone bump
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sylvania in addition you want to do a
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little research on the economic health
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of this country so you ask your friend
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the economics professor how is the
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economy of bum sylvania doing these days
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one number that will almost definitely
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figure into her reply is the country's
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GDP this stands for gross domestic
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product GDP is a common measure that's
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used to roughly represent the size of a
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country's economy the way you calculate
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GDP is both simple as a general
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principle and complicated in the details
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the simple version is that GDP is the
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value of all the goods and services
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produced within a country in a given
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period of time such as a financial
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quarter or a year so if we look at bum
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sylvania we can calculate its yearly GDP
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by adding up the dollar value of all the
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stuff it creates all the pork sandwiches
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shoeshines fashion magazines bullets
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massages motorcycles jujitsu classes
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ghosts toad swamp tours and of course
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traditional bum sylvain e'en style
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wooden hats every item product or
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service brought to market by workers or
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other economic resources located inside
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the country in that year is part of the
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GDP coming up with this figure is not as
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easy as it sounds GDP is actually a
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highly complex and abstract statistical
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instrument that takes some real work to
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calculate just one example of the many
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complications let's say somebody cuts
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down some swap trees and turns those
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trees into lumber and then sells that
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lumber to a haberdasher who turns it
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into a traditional bump sylvain e'en
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style wooden hat do you count the sales
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of both the lumber and the Hat well no
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because GDP is a measure of the final
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value of goods and services so if you
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counted the sale of the wood
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hat maker and the sale of the Hat you'd
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be counting the same value twice GDP is
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probably the most important measure of
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the size and performance of an economy
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but it's not the only one
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there's also GNP which is related but
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slightly different
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GNP stands for gross national product
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the difference is that GNP is the value
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of all the products and services
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produced by a country's residents even
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if production takes place outside of the
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country so if a bump sylvania in
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business has a factory making wooden
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hats in another country the output of
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that factory would be included in bump
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sylvania GNP but not its GDP while GDP
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is a widely used indicator of economic
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strength many critics point out that
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it's not necessarily the best indicator
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of the real health of a nation for
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example a country with a large growing
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GDP might look strong on paper but what
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if that number is masking a vast income
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inequality a productive economy based on
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huge amounts of low-wage labor a simple
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example would be comparing GDP with
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population to come up with per capita
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GDP which means economic value per
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person so according to the World Bank in
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2013 China's GDP was a massive nine
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point two trillion dollars compare that
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de Luxembourg relatively small GDP of 60
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billion dollars yet in that same year
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China's GDP per capita was only about
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$6,800 while Luxembourg's was more than
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16 times that at about $110,000 so while
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China's economy is certainly much larger
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it looks like each individual citizen on
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average is better off in Luxembourg
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financially speaking that is so how do
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you think we should measure the health
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of a national economy should other
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factors like gross national happiness be
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included let us know in the comments and
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subscribe to our channel for more stuff
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of the brain variety and if you want to
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hear the answers to more questions ask
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away in the comments below it's how we
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